2019 (6) TMI 1099 - HC - Income Tax

Revision u/s 264 - Fringe benefit tax - benefits provided to the employees of the writ petitioner bank - rectification application under Section 154 of the Act was filed contending that there has been an erroneous charge of interest - whether the department is justified in retaining the tax paid by the petitioner towards the FBT tax for the contribution made by them to pension fund for the subsequent assessment year 2007-08? - HELD THAT - The writ petitioner had succeeded before the Tribunal in respect of the assessment year 2006-07. The Tribunal had held that the statutory contribution made to superannuation fund is outside the ambit of FBT. This is, of course subject to the determination of the issue by the higher courts. But, the position as on date is that the contribution made to the superannuation fund is not leviable to FBT. It is true that the writ petitioner had made voluntary payment. But, it is not the question of voluntariness or otherwise of the assessee in the matter of making payment. The question is one of liability. The department represents the soveriegn power of the State in matters relating to taxation. Whether the department had illegally collected the tax from the citizen or whether the assessee mistakenly paid the tax to the department, the consequence is one and the same. If the assessee had mistakenly paid, it is a case of illegal retention by the department. I sustain the stand of the authority that Section 264 of the Income Tax Act was clearly not applicable in this case. But then, Section 119 of the Income Tax Act could have been invoked. The authority ought to have posed only one question to himself i.e., whether the assessee was liable to pay the tax in question or not. If he was not liable to pay the tax in question, the department had no business to retain it even if it was wrongly paid. Of course, the question of paying interest for the retained amount will not arise. It is subject to the outcome of the challenge that is pending before the Madras High Court at the instance of the department. It is open to the respondent to pass such orders as the facts and circumstances warrant. But then, an applicant ought not to have been simply shown the door. . Volenti non fit injuria is a maxim invoked in the law of torts. It means that there is no injury to one who consents. The respondent appears to have applied the said principle while considering the petitioner's application. The respondent failed to note that the issue was not one of revisability of an order but one of refund. While the authority is right in holding that no revisable order existed, he should have also looked a little beyond and seen that no liability also existed. - Matter restored before the Pr. CIT.

Summary

Issues Involved:
1. Fringe Benefit Tax (FBT) on contributions to the approved pension fund.
2. Reopening of FBT assessment.
3. Application for revision under Section 264 of the Income Tax Act.
4. Condonation of delay in filing the application.
5. Jurisdiction and applicability of Section 119 of the Income Tax Act for refund.

Detailed Analysis:

1. Fringe Benefit Tax (FBT) on contributions to the approved pension fund:
The writ petitioner, a banking company, filed its FBT return for the assessment year 2007-08, including contributions to an approved pension fund. The value of the fringe benefit related to this contribution was ?6,01,54,994, with a notional tax of ?2,02,48,171. The petitioner paid FBT, including this amount, but later contested that such contributions should not be considered fringe benefits under the Income Tax Act.

2. Reopening of FBT assessment:
For the assessment year 2006-07, the petitioner’s FBT return was processed, and an intimation under Section 115 WE (1) was sent. The petitioner argued that contributions to the statutory pension fund should not be considered fringe benefits. However, the assessment was reopened, and the contributions were treated as fringe benefits subject to FBT. The petitioner appealed to the Commissioner of Income Tax (Appeals) and subsequently to the Income Tax Appellate Tribunal (ITAT), which ruled in favor of the petitioner, stating that statutory contributions to the superannuation fund are outside the ambit of FBT.

3. Application for revision under Section 264 of the Income Tax Act:
Following the favorable ITAT decision, the petitioner filed an application under Section 264 for the assessment year 2007-08, seeking revision and refund of the FBT paid. The application was dismissed as not maintainable due to the absence of an assessment order to be challenged.

4. Condonation of delay in filing the application:
The petitioner sought condonation of delay in filing the application under Section 264, arguing that the delay was due to the time taken for the ITAT decision. The court observed that while technical grounds for dismissal were sound, the authority should have taken a liberal view, considering the merits of the case and the principle of fairness.

5. Jurisdiction and applicability of Section 119 of the Income Tax Act for refund:
The court noted that the authority had the jurisdiction to address the issue under Section 119, which allows for the avoidance of genuine hardship and the granting of refunds even after the expiry of the specified period. The court emphasized that the issue was not about revisability of an order but the liability to pay the tax. The authority should have treated the application as one for refund and determined whether the petitioner was liable to pay the tax. The court directed the authority to pass orders afresh under Section 119 within eight weeks, quashing the impugned order.

Conclusion:
The court allowed the writ petition, highlighting that the authority should have considered the merits of the petitioner's claim for a refund under Section 119 of the Income Tax Act. The decision underscores the importance of fairness and the proper exercise of discretionary powers by tax authorities.